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Sex, drugs, gifts uncovered in government oil probe

  • Story Highlights
  • Democrats: Report shows Bush administration too close to oil industry
  • Interior Department inspector general found evidence of unethical activity
  • Officials had sex with, accepted gift from oil and gas employees, IG found
  • Department says taxpayers did not suffer any financial losses due to relationships
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WASHINGTON (CNN) -- U.S. government employees received improper gifts from energy industry representatives, and engaged with them in illegal drug use and inappropriate sexual relations, according to a report issued Wednesday.

A report says government officials accepted gifts from oil and gas company employees.

A report says government officials accepted gifts from oil and gas company employees.

The report was issued by the Interior Department's inspector general after a $5.3 million investigation "uncovered recreational marijuana and cocaine use" by "a handful" of Interior Department staff, and found two federal employees "engaged in brief sexual relationships with representatives from companies doing business" with the department.

Two Interior Department employees "received combined gifts and gratuities on at least 135 occasions from four major oil and gas companies with whom they were doing business -- a textbook example of improperly receiving gifts from prohibited sources," Inspector General Earl Devaney says in a letter to Interior Secretary Dirk Kempthorne accompanying the report.

Randall Luthi, head of the Minerals Management Service at the Interior Department, said the public had not suffered financial losses as a result of the employees' behavior.

Some of the government employees tried to hide their close association with the industry they were supposed to be regulating, the report says.

The investigation turned up e-mails in which MMS employees "preparing to attend industry events used such language as 'this trip is to be kept quiet,' or were asked to RSVP 'in private' by their supervisor," the report says.

"When we asked one of these employees why they needed to avoid discussing their social activities with industry, he responded with a slight chuckle, 'They might have, you know, contacted the [inspector general],' " the report says.

The investigation appears to have been prompted by an internal whistle-blower's report in 2006, and concerns activity from 2002 to 2006 by the department responsible for selling the oil and gas the government collects as rent from companies drilling on federal lands.

The report alleges inappropriate behavior by 19 members of the Royalty in Kind program -- about one-third of the department. Some have since left the department, making it unclear what kind of disciplinary action they could be subject to.

The Department of Justice declined to prosecute two former employees named in the report, the inspector general said, without saying why. Another pleaded guilty to a criminal charge.

Department of Justice spokeswoman Laura Sweeney said the department did receive "one or more referrals related to matters referenced in the Department of Interior inspector general reports," but she declined to comment further.

MMS head Luthi said only "six or seven" employees named in the report still work for the department. He vowed appropriate action by the time he leaves office in January.

Democrats used the report to accuse President Bush's administration of being too close to the oil industry.

"The Bush administration put an 'America for Sale' sign on the White House lawn from day one and has been courting Big Oil ever since," Rep. Louise Slaughter, D-New York and chairwoman of the House Rules Committee, said in a written statement. "Democrats have been saying it for some time, but this proves it. This administration is literally in bed with Big Oil. Little did we know they were such a cheap date."

Sen. Bill Nelson, a Florida Democrat, said the report should make Congress reconsider plans to expand offshore drilling.

"The rest of the United States government doesn't need to jump in bed with" the oil industry, he said.

"Offshore drilling will not solve our energy crisis nor will it bring down prices at the pump," Nelson said. "Instead, it will enrich the oil companies and reward the culture of corruption that has been fostered, funded and now exposed by the inspector general."

House Speaker Nancy Pelosi, D-California, said in a statement:

"This report documents the 'pervasive culture of exclusivity' that has cheated the American taxpayer out of the billions of dollars owed them by the oil companies," Pelosi said.

Sen. Dianne Feinstein, D-California, called the allegations in the report "unacceptable."

House Minority Leader John Boehner, a Republican from Ohio and an advocate of easing drilling rules, said that in 2006, "our members on the Government Reform Committee were investigating this problem in the department."

"Our members of the last two years ... have been pushing [current] Chairman [Rep. Henry] Waxman to continue this investigation and to have hearings and he's refused to do it," Boehner said. Waxman is a Democrat from California.

Two oil companies mentioned in the report, Shell and Chevron, declined to comment, saying they still needed to review it.

A third, Hess, said in a statement: "We do not believe we are the focus of the investigation and we will cooperate with any further requests from the inspector general's office that may arise."

CNN's Karina Frayter and Carol Cratty contributed to this report.

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